Southwest Airlines climbs to top in Milwaukee

Gary Kelly is in the process of meshing two airlines and making decisions that affect regional economies across the U.S. - including Milwaukee's - in an era of contradictory market trends rooted in the global wackiness that surrounds crude oil prices.
 
If one of the 46,000 people he leads as CEO of Southwest Airlines shows up for work in a chicken suit, so much the better.

Amid industrywide upheaval, the likes of which hasn't been seen in more than a generation, Southwest has emerged as the dominant carrier at Milwaukee's Mitchell International Airport. It intends to stay that way, Kelly said, but whether it expands its presence here is a question he can't answer at this point.

"Right now, Southwest and AirTran combined have 40 to 50 daily departures" from Milwaukee, Kelly said in an interview last week. "My hope is that we can sustain that in the near term and grow that in the longer term."

Kelly was in town meeting with customers, employees and media as Southwest continues the process of merging AirTran Airways into its operations after buying AirTran in 2011.

If history is any indication, Southwest is likely to expand its presence in Milwaukee. In cities where it has become the dominant carrier - St. Louis, Kansas City, Mo., Baltimore, Nashville, Tenn., San Diego to name a few - the airline has started small and grown almost exponentially.

It is the nation's largest domestic airline, having carried 104 million passengers last year. But the airline business has changed so much in recent years, it's hard to use history as a guide, Kelly said.

"The airline business is tough," he said. "We are doing combat with an inconsistent economy and also high fuel prices.

"That's the only thing that tempers my enthusiasm here in the near term."

Right now, Southwest has its plate full with bringing AirTran under its umbrella.

In buying AirTran last year, Southwest gained an established presence in Atlanta, which ranks with Chicago O'Hare as the nation's two busiest airports.

Southwest also picked up AirTran's significant presence in Milwaukee.

"Right now, we're not optimized between Southwest and AirTran" in Milwaukee, Kelly said. "You take the total daily departures, we're in that 40 to 50 range. Once we get better optimized my goal would be to sustain that level of flight activity.

"Then, once we gather our feet under us, so to speak, then I would love to grow it from there."

Kelly says the business community in Milwaukee has not been shy about letting the company know what it wants.

"For the most part, they speak to us with one voice," he said. "They want more flights, they want more nonstops."

Unless there is enough business to justify it, Southwest - or any other airline for that matter - isn't going to add nonstop service, said Barry Bateman, airport director at Mitchell International.

The industry's business model is to fly planes at capacity. "It's all about spreading fixed costs," Bateman said.

Kelly said Southwest will look at eventually adding new nonstop service from Milwaukee.

"We have a number of significant destinations that we serve across the country which will all be logical nonstop considerations for us," he said. "We'll be looking at that very carefully over the next couple of years.

"We know what you want in the market."

Southwest has been profitable for 39 straight years.

"We have a history of being a very stable force in a market," Kelly said. "You should expect from us that we are going to be here, we're going to be consistent."

But exactly what the airline may eventually look like here is an open question.

"I've always felt like Milwaukee had the prospect of being a 50-flight a day market," Kelly said. "Whether it ends up at 35 or 75, who knows?"

Don't look for Southwest to go crazy raising prices in Milwaukee on routes where it is dominant, Kelly and an industry analyst say.

"They have historically been viewed as a carrier that disciplines other carriers' pricing," said Robert Mann, an airline consultant based in New York. "They were the 800-pound gorilla and they still are.

"You don't see them charging $1,100 round trip between Boston and Philadelphia for a walk-up customer, which some carriers do - which is insane, by the way."

Some dominant carriers in the past have acted as monopolists, Mann said.

"They will rake you over the coals if they think they can," he said. "I really don't see that behavior from Southwest, even in a market that they dominate."

Kelly was emphatic that his airline prices remain stable across markets.

"We very much have a different approach. Our competitors have a great disparity in their pricing between markets. You don't find that disparity in the way we price our markets."

Besides, he said, Milwaukee is still considered a very competitive airline market.

"There's going to be a lot of competition in Milwaukee," Kelly said. "It's not like we are going to be a monopoly, nothing remotely close to that."

As far as business travel, Southwest will be working to build its customer base in Milwaukee, Kelly said.

"We want to have full airplanes and certainly would hope that 35% to 40% or 50% are flying us for business," Kelly said. "We are the largest airline in America. On average around the country, about 35% of our customers fly on us for business. By extension, that makes us America's largest business airline.

"I think we have a great product for business travelers," he added. "We'll need that support from Milwaukee.

"We're going to work hard to earn it. That I'll guarantee."

That might include occasionally donning a chicken suit.

"Our employees are celebrated when they do things that are a little off-script," Kelly said. "That's not to suggest that anybody does anything unsafe or does anything that would be considered rude or discourteous.

"But when you go out of your way to show care and concern for somebody, we celebrate that."

Kelly sounds like someone whose airline is in Milwaukee for the long haul.

"I do think there is a very good opportunity here. But in the end, we're going to have to make it happen," he said. "We're going to have to serve the market. We're going to have to have the flights. We're going to have to win the business. And then, business is going to have to support us.

"I have very high hopes for our success here."

Story and photo:  http://www.jsonline.com